Bill Text: TX SB1650 | 2015-2016 | 84th Legislature | Engrossed
Bill Title: Relating to credit services organizations and extensions of consumer credit, including extensions of consumer credit facilitated by credit services organizations.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Engrossed - Dead) 2015-05-20 - Left pending in committee [SB1650 Detail]
Download: Texas-2015-SB1650-Engrossed.html
By: Eltife | S.B. No. 1650 |
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relating to credit services organizations and extensions of | ||
consumer credit, including extensions of consumer credit | ||
facilitated by credit services organizations. | ||
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
SECTION 1. Section 393.001, Finance Code, is amended by | ||
amending Subdivision (1) and adding Subdivisions (1-a), (2-a), | ||
(3-a), (4-a), (5), (6), (7), and (8) to read as follows: | ||
(1) "Commissioner" means the consumer credit | ||
commissioner. | ||
(1-a) "Consumer" means an individual who is solicited | ||
to purchase or who purchases the services of a credit services | ||
organization. | ||
(2-a) "Credit access business" means a credit services | ||
organization that obtains for a consumer or assists a consumer in | ||
obtaining an extension of consumer credit. | ||
(3-a) "Deferred presentment transaction" means a | ||
deferred presentment transaction under Section 341.001, in | ||
connection with which the consumer is not required to provide real | ||
or personal property as security. | ||
(4-a) "Finance commission" means the Finance | ||
Commission of Texas. | ||
(5) "Military borrower" includes a "covered member" or | ||
a "dependent" with respect to a covered member, as those terms are | ||
defined by 10 U.S.C. Section 987 or a successor statute. | ||
(6) "Motor vehicle title loan" means a loan in which an | ||
unencumbered motor vehicle is given as the only security for the | ||
loan. The term does not include a retail installment transaction | ||
under Chapter 348 or another loan made to finance the purchase of a | ||
motor vehicle. | ||
(7) "Office" means the Office of Consumer Credit | ||
Commissioner. | ||
(8) "Service" means an act, conduct, or activity that | ||
is performed or to be performed for a consumer's benefit or that | ||
involves assisting a consumer in obtaining an extension of consumer | ||
credit, including: | ||
(A) negotiating or closing a loan or other | ||
extension of consumer credit; | ||
(B) issuing a guaranty, letter of credit, or | ||
other credit enhancement; and | ||
(C) servicing an extension of consumer credit. | ||
SECTION 2. Sections 393.201(b) and (c), Finance Code, are | ||
amended to read as follows: | ||
(b) In addition to the notice required by Section 393.202, | ||
the contract must: | ||
(1) contain the payment terms, including the total | ||
payments to be made by the consumer, whether to the organization or | ||
to another person; | ||
(2) fully describe the services the organization shall | ||
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promise of a full or partial refund and the estimated period for | ||
performing and completing all of the services, not to exceed 180 | ||
days; | ||
(3) contain the address of the organization's | ||
principal place of business; and | ||
(4) contain the name and address of the organization's | ||
agent in this state authorized to receive service of process. | ||
(c) A contract with a credit access business[ |
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Subsection (b) and Section 393.302: | ||
(1) contain a statement that there is no prepayment | ||
penalty; | ||
(2) contain a statement that a credit access business | ||
must comply with Chapter 392 and the federal Fair Debt Collection | ||
Practices Act (15 U.S.C. Section 1692 et seq.) with respect to an | ||
extension of consumer credit [ |
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(3) contain a statement that a person may not threaten | ||
or pursue criminal charges against a consumer related to a check or | ||
other debit authorization provided by the consumer as security for | ||
a transaction in the absence of forgery, fraud, theft, or other | ||
criminal conduct; | ||
(4) contain a statement that a credit access business | ||
must comply, to the extent applicable, with 10 U.S.C. Section 987 | ||
and any regulations adopted under that law with respect to an | ||
extension of consumer credit [ |
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(5) disclose to the consumer: | ||
(A) the lender from whom the extension of | ||
consumer credit is obtained; | ||
(B) the interest paid or to be paid to the lender; | ||
and | ||
(C) the specific fees that will be paid to the | ||
credit access business for the business's services and to any third | ||
party; and | ||
(6) contain the name and address of the office, the | ||
office's website address, [ |
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and the telephone number of the office's consumer helpline. | ||
SECTION 3. Section 393.222(b), Finance Code, is amended to | ||
read as follows: | ||
(b) The finance commission [ |
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may adopt rules to implement this section. | ||
SECTION 4. Section 393.223(a), Finance Code, is amended to | ||
read as follows: | ||
(a) Before performing services described by Section | ||
393.001(2-a) [ |
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a consumer a disclosure adopted by rule of the finance commission | ||
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form prescribed by the commission: | ||
(1) the interest, fees, and annual percentage rates, | ||
as applicable, to be charged on a deferred presentment transaction | ||
or on a motor vehicle title loan, as applicable, in comparison to | ||
interest, fees, and annual percentage rates to be charged on other | ||
alternative forms of consumer debt; | ||
(2) the amount of accumulated fees a consumer would | ||
incur by renewing or refinancing a deferred presentment transaction | ||
or motor vehicle title loan that remains outstanding for a period of | ||
two weeks, one month, two months, and three months; [ |
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(3) information regarding the typical pattern of | ||
repayment of deferred presentment transactions and motor vehicle | ||
title loans; and | ||
(4) the name of the credit access business and any | ||
unique number assigned to the license issued to the business under | ||
Subchapter G. | ||
SECTION 5. Section 393.224, Finance Code, is amended to | ||
read as follows: | ||
Sec. 393.224. ADMINISTRATIVE PENALTY. The [ |
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finance commission [ |
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administrative penalty against a credit access business that | ||
knowingly and wilfully violates this subchapter or a rule adopted | ||
under this subchapter in the manner provided by Subchapter F, | ||
Chapter 14. | ||
SECTION 6. Subchapter D, Chapter 393, Finance Code, is | ||
amended by adding Section 393.308 to read as follows: | ||
Sec. 393.308. PROHIBITION ON OBTAINING CERTAIN LOANS OR | ||
EXTENSIONS OF CREDIT. (a) A credit services organization may not | ||
obtain for a consumer or assist a consumer in obtaining an extension | ||
of consumer credit that: | ||
(1) is made by a lender that is affiliated with the | ||
credit services organization or has any ownership, directors, | ||
officers, members, or employees in common with the credit services | ||
organization; or | ||
(2) results in any portion of the fee charged by the | ||
credit services organization being passed to a lender. | ||
(b) A credit services organization may not charge or receive | ||
from a consumer a fee or other valuable consideration in connection | ||
with a loan or other extension of consumer credit that is prohibited | ||
by Subsection (a). | ||
(c) The finance commission may adopt rules to implement this | ||
section. | ||
SECTION 7. Section 393.602, Finance Code, is amended to | ||
read as follows: | ||
Sec. 393.602. APPLICABILITY. (a) This subchapter applies | ||
only to a credit services organization that obtains for a consumer | ||
or assists a consumer in obtaining an extension of consumer credit | ||
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(b) A credit access business may assess fees as agreed to | ||
between the parties for [ |
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consumer, assist a consumer in obtaining, or service an extension | ||
of consumer credit in the form of a deferred presentment | ||
transaction or motor vehicle title loan, including a new extension | ||
of consumer credit [ |
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access business fee may be calculated daily, biweekly, monthly, or | ||
on another periodic basis. A credit access business is permitted to | ||
charge amounts allowed by other laws, as applicable. A fee may not | ||
be charged unless it is disclosed. A credit access business may not | ||
charge any fee for an action performed after maturity of an | ||
extension of consumer credit that the business obtains for a | ||
consumer or assists a consumer in obtaining, except for a charge | ||
authorized under Section 393.629. | ||
(b-1) Notwithstanding Subsection (a) or (b), a credit | ||
services organization that is not obtaining for a consumer or | ||
assisting a consumer in obtaining an extension of consumer credit | ||
may also charge or receive from a consumer a fee or other valuable | ||
consideration in connection with advice, assistance, or other | ||
services that the credit services organization provides to improve | ||
a consumer's credit history or rating. | ||
(c) A person may not use a device, subterfuge, or pretense | ||
to evade the application of the provisions of this chapter that | ||
apply to a credit access business [ |
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transaction governed under another statute, including Title 1, | ||
Business & Commerce Code, does not violate this subsection and may | ||
not be considered a device, subterfuge, or pretense to evade the | ||
application of this chapter [ |
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SECTION 8. Section 393.604(a), Finance Code, is amended to | ||
read as follows: | ||
(a) An application for a license under this subchapter must: | ||
(1) be under oath; | ||
(2) give the approximate location from which the | ||
business is to be conducted; | ||
(3) identify the business's principal parties in | ||
interest; | ||
(4) contain the name, physical address, and telephone | ||
number of all third-party lender organizations: | ||
(A) with which the business contracts to provide | ||
services; [ |
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(B) from which the business arranges extensions | ||
of consumer credit [ |
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(5) contain other relevant information that the | ||
commissioner requires for the findings required under Section | ||
393.607. | ||
SECTION 9. Section 393.622, Finance Code, is amended to | ||
read as follows: | ||
Sec. 393.622. RULES. (a) The finance commission may: | ||
(1) adopt rules necessary to enforce and administer | ||
this subchapter; | ||
(2) adopt rules with respect to reports of summary | ||
business information required to be submitted [ |
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393.627 [ |
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(3) adopt rules with respect to periodic examination | ||
by the office relating to extensions of consumer credit the | ||
business obtained for a consumer or assisted a consumer in | ||
obtaining [ |
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related to charges for defraying the reasonable cost of conducting | ||
the examinations. | ||
(b) The finance commission may adopt rules under this | ||
section to allow the commissioner to review, as part of a periodic | ||
examination, any relevant contracts between the credit access | ||
business and the third-party lender organizations with which the | ||
credit access business contracts to provide services [ |
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of consumer credit [ |
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or information obtained by the commissioner under this section is | ||
considered proprietary and confidential to the respective parties | ||
to the contract, and is not subject to disclosure under Chapter 552, | ||
Government Code. | ||
(c) Nothing in Section 393.201(c) or Sections | ||
393.602-393.628 [ |
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commission or the office [ |
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to establish a limit on the fees charged by a credit access | ||
business. | ||
SECTION 10. Subchapter G, Chapter 393, Finance Code, is | ||
amended by adding Sections 393.6221 and 393.6222 to read as | ||
follows: | ||
Sec. 393.6221. EXAMINATION OR INVESTIGATION BY | ||
COMMISSIONER; OATHS. (a) At the times the commissioner considers | ||
necessary, the commissioner or the commissioner's representative | ||
shall: | ||
(1) examine each place of business of each credit | ||
access business; and | ||
(2) investigate the credit access business's | ||
transactions and records, including books, accounts, papers, and | ||
correspondence, to the extent the transactions and records pertain | ||
to business regulated under this chapter. | ||
(b) The credit access business shall: | ||
(1) give the commissioner or the commissioner's | ||
representative free access to the credit access business's office, | ||
place of business, files, safes, and vaults; and | ||
(2) allow the commissioner or the commissioner's | ||
representative to make a copy of an item that may be investigated | ||
under Subsection (a)(2). | ||
(c) During an examination or an investigation, the | ||
commissioner or the commissioner's representative may administer | ||
oaths and examine a person under oath on a subject pertinent to a | ||
matter that the commissioner is authorized or required to consider, | ||
investigate, or secure information about under this chapter. | ||
Sec. 393.6222. CREDIT ACCESS BUSINESS'S RECORDS; DOCUMENT | ||
RETENTION REQUIREMENTS. (a) A credit access business shall | ||
maintain a record of each extension of consumer credit that the | ||
business obtains for a consumer or assists a consumer in obtaining | ||
under this chapter as is necessary to enable the commissioner to | ||
determine whether the credit access business is complying with this | ||
chapter. | ||
(b) A credit access business shall keep the record until the | ||
later of: | ||
(1) the fourth anniversary of the date of the contract | ||
described by Section 393.201; or | ||
(2) the second anniversary of the date on which the | ||
final entry is made in the record. | ||
(c) A record described by Subsection (a) must be prepared in | ||
accordance with accepted accounting practices. | ||
(d) The commissioner shall accept a credit access | ||
business's system of records if the system discloses the | ||
information reasonably required under Subsection (a). | ||
SECTION 11. Section 393.625, Finance Code, is amended to | ||
read as follows: | ||
Sec. 393.625. MILITARY BORROWERS. An extension of consumer | ||
credit [ |
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credit access business for a military borrower [ |
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and any regulations adopted under that law, to the extent | ||
applicable. | ||
SECTION 12. Section 393.626, Finance Code, is amended to | ||
read as follows: | ||
Sec. 393.626. DEBT COLLECTION PRACTICES. (a) A violation | ||
of Chapter 392 by a credit access business with respect to an | ||
extension of consumer credit [ |
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constitutes a violation of this subchapter. | ||
(b) With respect to an extension of consumer credit, a | ||
credit access business must comply with all provisions of the Fair | ||
Debt Collection Practices Act (15 U.S.C. Section 1692 et seq.) that | ||
apply to a debt collector as defined by 15 U.S.C. Section 1692a. A | ||
violation of those provisions is a violation of this subchapter. | ||
SECTION 13. Section 393.627, Finance Code, is amended to | ||
read as follows: | ||
Sec. 393.627. REPORTS [ |
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(a) A credit access business shall file a quarterly report with | ||
the commissioner on a form prescribed by the commissioner that | ||
provides the following information relating to extensions of | ||
consumer credit [ |
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preceding quarter: | ||
(1) the number of consumers for whom the business | ||
obtained or assisted in obtaining those extensions of consumer | ||
credit; | ||
(2) the number of those extensions of consumer credit | ||
obtained by the business or that the business assisted consumers in | ||
obtaining; | ||
(3) the number of refinancing transactions of the | ||
extensions of consumer credit described by Subdivision (2); | ||
(4) the number of consumers refinancing the extensions | ||
of consumer credit described by Subdivision (2); | ||
(5) the number of consumers refinancing more than once | ||
the extensions of consumer credit described by Subdivision (2); | ||
(6) the average amount of the extensions of consumer | ||
credit described by Subdivision (2); | ||
(7) the total amount of fees charged by the business | ||
for the activities described by Subdivision (1); | ||
(8) the number of vehicles surrendered or repossessed | ||
under the terms of an extension of consumer credit in the form of a | ||
motor vehicle title loan obtained by the business or that the | ||
business assisted a consumer in obtaining; and | ||
(9) [ |
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determines necessary. | ||
(b) A credit access business shall file with the | ||
commissioner an annual report for each licensed location on a form | ||
prescribed by the commissioner that provides the following | ||
information relating to extensions of consumer credit during the | ||
preceding year: | ||
(1) the number of extensions of consumer credit paid | ||
in full or otherwise closed for a reduced payoff; | ||
(2) the number of refinancing transactions of | ||
extensions of consumer credit that occurred before the extension of | ||
consumer credit was paid in full or otherwise closed for a reduced | ||
payoff; | ||
(3) the total amount of fees charged by the business in | ||
connection with extensions of consumer credit; | ||
(4) the number of consumers for whom the business | ||
obtained or assisted in obtaining an extension of consumer credit; | ||
(5) the total dollar amount of extensions of consumer | ||
credit that the business obtained for or assisted consumers in | ||
obtaining; and | ||
(6) any related information the commissioner | ||
determines necessary. | ||
(c) All information submitted by a credit access business to | ||
the commissioner for inclusion in a report under this section is | ||
confidential. | ||
(d) The commissioner shall publish a statewide consolidated | ||
analysis and recapitulation of reports filed under this section, | ||
including an analysis of the 15 largest metropolitan statistical | ||
areas and the five largest counties of this state. | ||
SECTION 14. Subchapter G, Chapter 393, Finance Code, is | ||
amended by adding Section 393.6271 to read as follows: | ||
Sec. 393.6271. REPORT ON HIGH-COST LENDING. (a) Not later | ||
than December 31 of each year, the commissioner shall study and | ||
publish on the office's Internet website a report on high-cost | ||
lending to consumers, including the availability and prices of | ||
financial services to individual consumers in this state. | ||
(b) In coordination with the finance commission's | ||
administration of the Texas Financial Education Endowment, the | ||
commissioner may contract with public and private entities to carry | ||
out research for the report required by this section. | ||
(c) Not later than December 31 of each year, the | ||
commissioner shall provide the report to the legislature. | ||
SECTION 15. Section 393.628, Finance Code, is amended by | ||
amending Subsection (b) and adding Subsection (b-1) to read as | ||
follows: | ||
(b) The commissioner shall remit to the comptroller amounts | ||
received under Subsection (a) for deposit in an interest-bearing | ||
deposit account in the Texas Treasury Safekeeping Trust Company. | ||
Money in the account may be spent by the finance commission only for | ||
the purposes provided by this section. Amounts in the account may | ||
be invested and reinvested in any kind of investment that prudent | ||
investors, exercising reasonable care, skill, and caution, would | ||
acquire or retain in light of the purposes, terms, distribution | ||
requirements, and other circumstances then prevailing, taking into | ||
consideration the investment of all the assets of the account | ||
rather than a single investment [ |
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investments shall be deposited to the credit of the account. | ||
(b-1) The expenses of managing the investments shall be paid | ||
from the account. | ||
SECTION 16. Subchapter G, Chapter 393, Finance Code, is | ||
amended by adding Sections 393.629 through 393.632 to read as | ||
follows: | ||
Sec. 393.629. CHARGES FOR COLLECTING DEBT. A contract | ||
between a consumer and a credit access business may provide for the | ||
payment of: | ||
(1) reasonable attorney's fees if the contract is | ||
referred for collection to an attorney who is not a salaried | ||
employee of the credit access business or the third-party lender; | ||
(2) court costs and disbursements; and | ||
(3) for a motor vehicle title loan, reasonable | ||
expenses incurred in connection with the repossession, | ||
sequestration, holding, or disposition of the motor vehicle that do | ||
not exceed the amount actually paid by the credit access business or | ||
the lender to a third party for the repossession, sequestration, | ||
holding, or disposition of the motor vehicle. | ||
Sec. 393.630. FILING A CRIMINAL CHARGE AGAINST A CONSUMER. | ||
A credit access business may not threaten or pursue a criminal | ||
charge against a consumer related to an extension of consumer | ||
credit unless the credit access business possesses evidence that is | ||
sufficient to prove that the consumer violated a criminal law. For | ||
purposes of this section, in a deferred presentment transaction, a | ||
person does not violate a criminal law solely by issuing a check or | ||
authorization on an account with insufficient funds. | ||
Sec. 393.631. REQUIREMENTS APPLICABLE TO EACH EXTENSION OF | ||
CONSUMER CREDIT. (a) Each extension of consumer credit that a | ||
credit access business obtains for a consumer or assists a consumer | ||
in obtaining must meet all the requirements applicable to the | ||
original extension of consumer credit, including the disclosure and | ||
contract requirements described by Sections 393.105, 393.201, | ||
393.202, 393.203, and 393.223. | ||
(b) An extension of consumer credit under Subsection (a) | ||
includes: | ||
(1) an original extension of consumer credit; | ||
(2) any type of transaction in which all or a portion | ||
of the principal, fees, or interest due under an outstanding | ||
extension of consumer credit becomes due on a later date; and | ||
(3) an extension of consumer credit that consists of | ||
debt arising from principal, fees, or interest that was not paid in | ||
full under an outstanding or previous extension of consumer credit. | ||
Sec. 393.632. RULES. The finance commission shall adopt | ||
any rules necessary to implement Sections 393.629-393.631. | ||
SECTION 17. Sections 393.221 and 393.601, Finance Code, are | ||
repealed. | ||
SECTION 18. The changes in law made by this Act apply only | ||
to an extension of consumer credit, including an extension of | ||
consumer credit described by Section 393.631, Finance Code, as | ||
added by this Act, made on or after the effective date of this Act. | ||
An extension of consumer credit made before the effective date of | ||
this Act is governed by the law in effect on the date the extension | ||
of consumer credit was made, and the former law is continued in | ||
effect for that purpose. | ||
SECTION 19. This Act takes effect September 1, 2015. |